Block Bits Founder Convicted in $960K Fake Crypto Bot Scheme

A federal jury in San Francisco has convicted Japheth Dillman, founder of Block Bits, on four counts of wire fraud and one count of conspiracy. The scheme involved approximately $960,000 raised from 22 investors between June 2017 and August 2018 under the promise of a non-existent automated bot.

Dillman and his partner, David Mata, promoted the investment vehicle Block Bits Fund I, claiming they had proprietary software capable of trading 100 digital assets across more than 30 exchange platforms. However, prosecutors determined that the bot was never developed or deployed.

The actual trading consisted of manual orders placed by Mata on a single exchange account, despite Dillman reporting positive monthly returns to clients for June and July 2017. The scheme also involved false claims regarding asset custody, with promoters telling investors that roughly 40% of the capital was secured in low-risk cold storage.